12/15/2009 @ 7:00PM

Cities Where Americans Are Getting Richer

The news coming out of dusty border city El Paso, Texas, is usually pretty grim. The metro suffers from 9.5% unemployment, declining high-school graduation rates and inadequate infrastructure. But a closer look reveals an employment picture that, at least in one way, is improving. In the past three years, incomes for college graduates there have steadily grown more than any other major metropolitan area.

Several factors, like increased border patrol activity requiring jobs in intelligence and other white-collar work, and recent expansions of both Fort Bliss, one of the country’s largest military bases, and the local University of Texas campus, have boosted pay for educated Texans. Couple that with El Paso’s relative protection from the battered housing economy and it’s easier to see why pay is inching up.

“Under most circumstances, it would be surprising for El Paso to rank so highly on any type of income gauge,” says Tom Fullerton, economics professor at the University of Texas at El Paso. “But there has been some really fortunate timing in terms of expansion in the local economy.”

Indeed, it’s not always the most affluent or economically robust cities where incomes for professionals have jumped the most, according to data provided by Seattle-based Payscale, an online provider of employee compensation data with a database of 18.5 million employee profiles. Median pay rose in El Paso by 19.4% to $49,100 since 2006, handily outpacing the 8% national growth for college grads.

Closely following El Paso are Bakersfield, Calif., an oil town packed with engineers, where incomes are up 18.5%; Omaha, Neb., a national center for large insurance carriers like Mutual of Omaha, which saw an 18.4% jump; and Virginia Beach, Va., home to U.S. military bases including Naval Air Station Oceana, where the median rose 17.3%.

This list offers a different view of the economy than the national jobs landscape with which Americans are all too familiar: 15.4 million are unemployed, 135,000 jobs are lost each month and incomes for many are stagnant. But in some urban areas where growth industries like government, health care and education are prevalent, college graduates have seen modest, but steady, income growth.

Behind the Numbers

Payscale.com studied the compensation of college graduates for which it had data–about 1.5 million people–in the 100 most populous Metropolitan Statistical Areas (regions defined by the U.S. Office of Management and budget that the federal government uses to collect statistics) in the country. It ranked metros on the compounded income growth between 2006 and 2009 to arrive at the cities where Americans are getting richer.

Metros in the top 10 are scattered throughout the Northeast, Midwest, South and Hawaii, showing that income growth has more to do with what you do than where you live. Incomes in the best-performing metros are heavily influenced by the dominant industries there–and in particular, whether those industries pay well for college graduates.

Bakersfield, Calif., suffers from a 14.5% unemployment rate and a sharp loss of housing industry jobs. But the engineering profession has a strong presence there, as do the oil and gas extraction industries, all of which require highly skilled workers.

“Bakersfield has a high unemployment rate, but what we’re seeing is not affecting college grads,” says Al Lee, director of quantitative analysis at Payscale. “So if you have a college degree and you’re working as a petroleum engineer, you’re doing fine.”

A city like Phoenix, whose economic fortunes have changed dramatically for the worse in the past three years, is a surprising member of the top 10. But the tumbling housing industry, while it cost many building jobs, had less of an impact on college graduates. Some of the few jobs that remain are top-earning ones. Cynthia Kroll, senior regional economist at the Fisher Center of Real Estate and Urban Economics at the Haas School of Business, University of California Berkeley, compares it to the trimming of low-wage jobs in Silicon Valley after the dot-com bust early in the decade.

“When the crash comes, and you lay off 75%, you tend to keep the higher-paid jobs. So your salary base goes up,” says Kroll. “It’s not that highly skilled people don’t also get laid off, but the mix is going to be weighted toward the more experienced, more skilled workers that you’re going to need when growth comes back.”

Cities like Charlotte, N.C., benefit from one of the country’s strongest industries, and one that counts highly skilled workers among its ranks: Education. Charlotte is home to a half-dozen universities, Johnson & Wales University among them.

These trends are another indicator that the country is in the midst of a significant and in many places painful transition from a manufacturing economy to one driven by service and technology jobs. The change has mixed implications for educated workers. Jobs have been lost in industries that were often unionized, which raised salaries, and fewer union jobs may drag incomes down on the whole.

“As those industries have shorn jobs, the proportion of families with middle incomes has declined,” says Douglas Hall, director of the Economic Analysis and Research Institute at the Economic Policy Institute, an economics-based think tank in Washington, D.C. “Manufacturing’s role in the economy has changed, and we haven’t wrapped our heads around what the implications are.”

The lack of strong regional patterns in the metros becoming richest reveals more than anything how varied local economies are. Only a close look at the mix of industries in every city, and its political and economic underpinnings, explains the direction in which incomes are moving.

“Bakersfield and El Paso are really different from Virginia beach and Honolulu. That in itself is interesting” says Kroll. “It may well be a different story in each place.”